Investor reactions to negative audit remarks in different economic climates Evidence from listed companies in Norway from 2007 to 2019
Abstract
Using event study methodology, I find evidence of heuristics and biases influencing stock
prices of Norwegian firms receiving negative audit remarks. Price data and audit remarks are
collected from 2007 to 2019 to capture different business cycles. Data is collected manually
to increase event date precision. A benchmark index is used to create a mood state proxy
that can be compared to abnormal returns calculated from a market model. A positive
correlation is found, such that a negative (positive) mood state results in a downward
(upward) bias in abnormal returns at the event.